When is a dream about a boat sinking a good thing? Well, it’s better that it was a dream rather than real but I still think the symbolism of this dream was positive.

I don’t often remember dreams but when I do there always seems to be a reason. Let me setup the situation with some background as to what was going on in my life.

The spa business my wife and I own has been doing well. The one problem we have is that we need to hire more people to keep up with the demand so that’s a good thing. One hire we needed was a manager and we had found a winner. Our new manager was excellent in every way and really put us at ease. Now we could concentrate on other issues and keep growing. Three weeks into her employment, however, she stopped showing up to work. We could not reach her in any way. She didn’t return phone calls, emails, or texts. We were at a loss.

That’s when I had this dream. In the dream every time I checked on my boat it had sunk but, being a dream, it would rise up again. I’d leave and when I would return it had sunk again. But it would rise again. The pattern continued, sink, rise, sink, rise. And that’s when I woke up.

So why do I think this is a positive thing? Because being an entrepreneur, owning a business, is like being a sinking boat that can rise again. Things go wrong, some things are beyond your control, but when things go wrong you have to rise up and deal with them, fix them, and keep moving. Our manager chose Valentine’s Weekend not to show up and my wife and I stepped in and worked. We did what we had to do and the business kept moving. We sank but were able to rise again. I’m sure something else will happen to make us feel as if we’re sinking but we do what it takes to stay afloat. Whatever the challenge, we keep focused on success.

Saturday could have been a disaster but we rose to the challenge and had a very good day.

Entrepreneurs are gamblers who don’t gamble and risk takers who aren’t risky.

Sparked by curiosity, entrepreneurs explore farther and wider than most people but they aren’t reckless (at least not the successful ones).

Nothing happens without ideas, and curiosity is what leads to the best ideas. You have to go through a lot of ideas before you find that magical one that both excites you and works. That search can sometimes take a lifetime and the search is what many people don’t understand about entrepreneurs. In my interview with Gary Vaynerchuk he said he has ideas “24/7.” But he doesn’t blindly follow all of them or most of them or even some of them. He said that if the idea sticks around for a while, just won’t leave his mind, then he’ll follow it.

Which takes me to the idea of risk. Acting on any new idea has risk associated with it but there is a difference between being risky and taking a risk. Being risky is doing something without much thought or planning. Taking a risk is researching, learning as much as you can, turning the unknown into the known so that surprises are minimal, and then going for it. One approach is dangerous the other is smart.

A lot of people confuse this penchant for risk as gambling but gambling is a loser’s game, gambling is a game of chance and successful entrepreneurs work hard to reduce chance. You can’t eliminate chance but there comes a tipping point when risk has been reduced to the point that action makes sense. This is why I put the following quote in my book: “I have always found that if I move with seventy five per cent or more of the facts that I usually never regret it. It’s the guys who wait to have everything perfect that drive you crazy.” That was Lee Iococca, the former CEO of Chrysler and that is the difference between someone who sees entrepreneurship as risky, as gambling, and someone who understands risk and works to make it less risky.

The person who has to wait until all risk is eliminated will never be an entrepreneur, and the person who rushes in without thought or preparation won’t be successful, but the balance between these two extremes puts the odds in your favor. It’s why I ask What Next and why I work hard to answer that with facts.

I don’t want to cross the finish line feeling half dead, I want to cross that line feeling victorious no matter what place I’m in.

I’m no coach or professional trainer but, as I work my way up to 13.1 miles in preparation for my first half marathon, I have a specific method to my treadmill workouts (it’s cold outside).

I always start slow (my current starting pace is 5 mph) and increase my speed as the run continues. When I reach a comfortable speed (currently 5.5 mph) I stay there for most of the run. On longer runs I will drop back to 5 mph and then build up to 5.5 or higher to finish.

The point is that I want to finish better than I started, and the important takeaway is that it’s a gradual but building process. The same is true in life and business. A business doesn’t go from $100,000 in revenue to a million overnight, they build up to it over time.

Sometimes it’s necessary to pull back, to intentionally slow down, so you can be fresh and have the energy needed to see the goal to the end. How many people and businesses keep the pedal to the floor but run out of stamina or money?

As I was increasing my speed on the treadmill I thought about what incremental changes I could make in my life, what could I do more of to get ahead. As I was dropping back to my starting speed I thought about what I could let up on so I could focus on more important things.

This gave me a whole new perspective and I wanted to get off the treadmill right then and get to work (ok, I just wanted the workout to be over). So I finished strong and turned my attention to other ways I’ll be sure to finish strong.

While it’s true, it’s also a little too simple as tweets often are.
My real strategy is a buy continuously, but buy more when prices fall, and save (and hold) as prices rise.

Buy Continuously
This is your automatic savings and investing such as your 401k, Roth IRA, or 403b. Start young and do your best to max this out. Take full advantage of any matching funds and never, ever, take a loan out against these accounts. The money coming out of your paycheck on a regular basis is dollar cost averaging and captures both the ups and downs of the market and smooths out wild swings like the downside rout we’re having now.

Buy More as Prices Fall
When the market drops, that’s the time to buy. As Warren Buffet said, “be greedy when others are scared, be scared when others are greedy.” Don’t try to wait for the bottom, just dollar cost average more aggressively. Friday I invested less than 5% of the money I’ve been saving over the past year. As prices continue to fall I’ll buy more again.

Save as Prices Rise
Over the past year or so I haven’t been buying stocks (I buy stocks only in low cost index funds) and instead have been saving more aggressively. This doesn’t mean that I haven’t been buying any stocks, just not any above my set investment plan. Now I have more capital to invest and since prices are lower I hope to get better returns. Too many people don’t have the discipline to save like this but if you can then you’ll be prepared like I am.

It Paid Off Before

Do you remember how far the market fell in 2008? In 18 months the Dow Jones Industrial Average lost more than 50%. Many people sold, panicked really, but not me. I continued buying throughout 2008 but still I lost a huge amount of money, with my net worth diving 16.44% (check the chart below). In 2009, however, my plan and my discipline paid off. My net worth rebounded by 24.93%, more than recouping the losses of the previous year.

So what’s your plan in this tumultuous time for the market? Panic and sell at the worst time or stick with your plan and take advantage of low prices?

I don’t mean that in a negative way. I don’t think they need to be committed. I use insane in a positive, you-have-to-be-crazy-to-do-what-you-did, kind of way. As I lay out in my book What Next, you don’t go from a billboard advertising company to pioneering 24 hour cable news with CNN, as Ted Turner did, unless you’re a little crazy. You also don’t do that in a straight line. It takes twists and turns as you find the right path and go around or over obstacles.

Entrepreneurs hear that word, crazy, a lot. Imagine you said to friends or family that you were going to start a rocket company. Even if you had hundreds of millions of dollars, I think you would be called crazy. No, I know you would be called crazy because that’s exactly what Elon Musk’s friends called him.

But did you miss the big revelation in his story? Elon Musk had no expectation of making money at this venture. It was his passion and belief in something bigger that compelled him. In my previous post about this video called Crap Filter, Elon says that you have to be compelled to start a company or be the boss because it’s not easy. What is compelling you to do the things you do, and are you responding or pushing it off for later?

I think a lot of people confuse the word crazy with confident and compelled. Elon Musk is not crazy in the sense that we think of it, he’s just crazy enough to confidently follow through on what compels him.

Really this is about entrepreneur cheerleaders and success cheerleaders, people who sell hope and, this is the important part, make it sound easy. I’m a realist and nothing worth getting is easy. It might be enjoyable but it’s not easy. These cheerleaders remind me of the Geico commercial with Pinocchio as a motivational speaker, as he points to people he says have potential, his nose grows. Not everyone is going to be a wild success, not everyone can run a successful business. If a cheerleader like Anthony Robbins was Pinocchio his nose could hurt someone.

I’m not saying that having confidence is a bad thing or that being positive is a waste of time, I’m not telling you success isn’t worth working toward. I’m an advocate for curiosity, for adventure, for pushing yourself to your limits in order to discover what you’re good at, to find what excites you. Do all of those things but understand what you’re getting into, what you’ll likely face. I saw a tweet yesterday that is appropriate here:

Successful people are very good at managing risk, at understanding the odds and finding ways to tilt the odds in their favor.

You might think you’re good at that too and that’s where self-awareness comes into play. The cheerleaders out there will tell you you’re great, that everything will work out if you just believe but that’s not necessarily true. Belief only gets you so far.

This is why I’m a big fan of Gary Vaynerchuk, he puts a lot of value on self awareness, he’s not a cheerleader in the sense that he’s honest with himself and has no problem being honest with his advice.

Listen to the cheerleaders for inspiration, get fired up, but then get real. Look at your What Next from every angle and anticipate as many problems from the start. Be an optimist in the dream phase and a pessimist in the implementation phase.

It comes down to a topic I’ve touched on several times – risk. Both take risks but they are not risky – they find ways to minimize and manage risk.

Risk in business is like a swimmer approaching a pool. Diving into the water is not a risky thing on its own but diving into a pool with an unknown depth is.

Doing your research, finding out the depth of the pool, then planning your entry is how you minimize risk. The angle of entry is how you manage risk. What neither Warren Buffet nor Richard Branson do is dive in the shallow end, the risk is too high. Instead they seek out the deep end. The deep end offers the most benefit with the least risk. It might still be dangerous but it’s less dangerous.

Of course once the research is done and the decision is made you still have to dive in and that’s what a lot of people don’t do, or wait too long to do and miss out on the opportunity. Once the key information is determined you have to move. Like a quote I used in the chapter called Risk in What Next, Lee Ioccoca, former CEO of Chrysler said: ““I have always found that if I move with seventy-five percent or more of the facts that I usually never regret it. It’s the guys who wait to have everything perfect that drive you crazy.”

I believe blanket statements are too simplistic and that’s why I flipped out on James Altucher for saying that people in their 20s should not invest in 401k plans. That’s dumb advice, so here’s my reasoning why 401k plans are a good investment, but not the best, and why they should be part of your investing life but not the only part. If you’re a numbers geek then you’ll love this post.

One of the completely idiotic statements James made was that you’ll only get a 1/2 percent return on a 401k so let’s take a look at my experience. A few things: I’m a consistent investor who believes in buy and hold and favors index funds over actively managed funds. Obviously I’m not going to use my actual account balances so instead I’ll use a hypothetical based on about $1,000 invested over 18 or so years which is how long I’ve been in the 401ks I’m using for this example.

Let’s say my current 401k account balance is $4,180. There are four parts that make up this balance:

1. How much I invested over the years

2. My company matching funds – free money

3. Dividends that are reinvested

4. Growth – what James Altucher said would be about 1/2 a percent (I’m shaking my head writing that)

My investments, the money that came out of my paycheck, accounts for 23.4% of that total or $978.12.

The company match, the free money James didn’t even mention, accounts for 5.1% or $213.18.

The dividends were a big part of this and is the reason I have mutual funds that pay higher dividends in my tax deferred retirement accounts, another item James was not impressed with but can be very important. You don’t pay taxes on dividends in a tax deferred account! So the dividends were 18.6% or $777.48.

Add all that up and you only get $1,968.78 far below my balance of $4,180 so where is the rest? The rest is growth over 18 years and accounts for 52.9% of the value of my 401k balance. That’s a lot more than the 1/2 a percent James mentioned is his video. Also of note is that this includes the huge losses in 2008, losses that were quickly recovered because I didn’t panic and stuck with my plan.

But in some small way I do agree with James that 401k plans are not always the best option. I have reduced the amount I’m investing in my 401k plan for a couple of reasons. First because the money is locked up until I’m 59 and a half (not 65 as James said in his video). I want to retire early and need money available before I’m 59.5 so I’ve been investing more in my taxable accounts.

Another reason I’ve reduced my 401k investments is so that I have funds available for other investment options like a business I opened a couple of years ago. If all my money was tied up in retirement accounts I’d be investment rich but cash poor like so many people are house rich and cash poor.

One size does not fit all and blanket statements are useless. The power of compounding, as evidenced here, is incredible! So please do invest in a 401k plan as early as possible and put enough money to at least get the full match your company offers (if they offer a match). After that make decisions that work for your situation.

To get my girlfriend (now wife) back into normal activity after her house burned down, my friends suggested I take her skiing. Julie skied before the fire and they figured she’d enjoy getting back to it. I, however, hate the cold and the idea of purposely going out in the cold was not appealing to me at all, but I did it anyway. I loved it!

We began skiing regularly and would spend a long weekend in Vermont every year with a large group of friends at a ski-in-ski-out home in Killington. One of those friends, Dave, was an excellent skier who had grown up in Colorado and even tried out for the US Olympic team. Dave became the coach for all of us amateurs.

I was getting quite good feeling comfortable on some black diamond runs but I was still falling more often then I wanted to. When I expressed my frustration to Dave he said, “If you aren’t falling, you aren’t learning.”

I was pushing myself to get better and when you take chances like that, not all of them work out. I could have taken it easy, stayed at the level I was at and never fallen again, but that didn’t appeal to me.

Coasting, resting on my laurels, in other aspects of life also doesn’t appeal to me. Constant improvement, trying new things, living life as an adventure, those things do appeal to me but sometimes I fall.

Falling is not fun but neither is stagnating. I’ll take the occasional fall if that means I’m getting better. Are you willing to fall once in a while?

April 15 is here and you’re either getting a refund or sending a check to the government but either way you’re doing it wrong.

I’m not saying that you can work things perfectly during the year and owe zero on April 15 but I will say that if you are getting more than a few hundred dollars back or sending more than that to Uncle Sam, you’re doing it wrong.

Making a Payment

Let’s start with why making a payment is a bad idea. Beside the obvious, that no one wants to be surprised with a big tax bill, there are other reasons. First, you’re not being aware of your money. You’re not planning well and that lack of planning is costing you now. The other thing is that Uncle Sam doesn’t like it either – he wants his money on time and will hit you with estimated payments in 2015 to make up for your shortfall.

Refund

This one is a little harder because who would complain about getting a nice fat check in April? Nobody! But it’s still poor planning. You just gave the government an interest free loan. They had your money and now they’re just giving it back. Taxes are not a savings account – or they’re a really bad one. It would be much better off to have the IRS deduct less money from your check so you could invest it – not spend it. Contribute more to your 401k, Roth IRA, or invest in index funds in a taxable account.

Balance

The important thing when playing the tax game is to achieve balance. If you are getting a big refund or owe a lot then make adjustments now to your withholding so that you can be in balance.